Few women would dispute the importance of financial empowerment. It was just a generation ago—until 1974—when banks were allowed to deny women credit such as credit cards or mortgages in their own names and based on their own financial wherewithal.
We’ve come a long way in those 40-odd years, but not nearly far enough. Study after study shows that women aren’t engaging enough with their finances. The financial-services industry is still falling short in serving this half of the population. Women, who often need more money in retirement to cover health and caretaking issues during their longer life spans, are, on average, far behind men in terms of savings. Financial empowerment gets lost in the daily chaos of living.
A few small steps can get you back on track. “Think of it as being the CEO of your own home,” says UBS financial advisor Tracy Byrnes. “You don’t need to know where the Dow closed, but you do need to know the big picture.”
That big picture entails compiling a list of your financial situation. Getting organized isn’t always fun, but it is satisfying. Barron’s worked with advisors to determine the basics of what every woman should know—and what, in their experience, they often don’t. Here’s how to tackle it like a boss.
Your Balance Sheet
Assets: Do an inventory of all of your assets at least once a year. This includes all your accounts—checking, savings, brokerage, retirement—as well as the value of your home and any other physical property. Note which assets are held jointly or separately. Make sure you have, or know where to find, updated information on account numbers, financial institutions, login credentials, and key contacts.
• Do you have enough cash to cover unexpected expenses or a period of lost income?
• How are the rest of your assets—in brokerage or retirement accounts—invested? What’s the ratio of stocks to bonds? What’s the rationale for however you’re invested?
• Are you saving in the most tax- and fee-efficient way? Are you saving more or less than last year? What would you like to see next year?
Liabilities: Do an inventory of everything you owe—all loans, credit card balances, and other liabilities. Note the total amount owed, monthly payment, and payoff dates. Add key account details and contacts.
• How much of your after-tax monthly income goes to pay debt?
• How much do you pay in interest every year, and can that be minimized?
• What expenses or behaviors are contributing to this debt, and what are your goals for paying it off?
Net Worth: Subtract liabilities from assets to estimate your net worth and set goals.
Your Income Statement
Income: Get a snapshot of your household’s monthly and annual income, both before (gross) and after (net) taxes.
• Are you earning more or less than last year? How dramatically does your annual income change year to year?
• How much investment income do you expect to have this year?
• Are you expecting income from unusual sources, such as a one-time bonus at work, an inheritance, or withdrawals from a retirement account?
Expenses: Get a snapshot of your household expenses, focusing on individual bills and categories where you spend the most.
• What expenses have increased or decreased in the past year, and what are your projections for the next year?
• How much do you save every month and where do you put it?
• What areas of your spending can go toward saving more and paying down debt faster?
Read More in Guide to Wealth
Your Strategic Plans
“A goal without a plan is just a wish,” wrote French existentialist author Antoine de Saint-Exupéry. Even seemingly nonfinancial goals often have a financial aspect, and, let’s face it, being financially secure makes a lot of things easier.
Think about what it is you want to do, and how you want to do it. Think big, and if your plans feel too out of reach, consider whether a financial advisor can help. A holistic financial plan can serve as a blueprint for enabling a career change, philanthropic goals, raising kids, the ability to care for others, and an array of other goals.
Retirement key questions:
• When do you want to retire? What does retirement look like, both ideally and realistically?
• How much of your retirement income will come from savings versus other sources, such as Social Security or pension benefits?
• How much do you need to have saved to get there? Are you on track?
• What can you change to have your savings meet your expectations?
Family key questions:
• Are you teaching and talking to your kids about money?
• Are you and your partner on the same page when it comes to bigger topics, such as loans for adult kids or college financing?
• Do you have college-savings plans? How much are you contributing, and is it too much or too little based on expected tuition?
Estate and Legacy key questions:
• Do you have updated wills and estate-planning documents?
• Do you have a charitable-giving plan?
• Do you want to manage this on your own or bring in a professional?
Take a look at variables that could disrupt your plans and any products or strategies for minimizing risk.
• If something happened to you or your partner today, would your survivors be OK financially?
• What life-insurance policies do you have? What is the amount, how long is the term, and is that enough?
• Do you have long-term disability insurance? Could that be helpful?
• What is the likelihood you’ll need to support a parent, sibling, or adult child at any point in the future?
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